Drought sends US producer prices surging

Rows of corn severely damaged by widespread drought is left standing for insurance adjusters to evaluate on a farm near Bruceville, Indiana in August 2012. US producer prices jumped 1.7 percent in August, the largest monthly rise in three years, sparked by skyrocketing crop prices due to drought and higher energy costs, fresh data showed.

US producer prices jumped 1.7 percent in August, the largest monthly rise in three years, sparked by skyrocketing crop prices due to drought and higher energy costs, fresh data released Thursday showed.

Prices for the crude raw materials used in production jumped 5.8 percent, with much of that coming from a sharp rise in the price of raw food inputs as the worst US drought in decades has savaged key crops like corn and soybeans, Labor Department data showed.

Also behind the crude materials surge was a 6.4 percent rise in energy.

Excluding those two volatile inputs, core producer prices were up only 0.2 percent last month.

Finished goods prices were up 2.0 percent year on year, up from the second quarter but sharply lower than the first quarter and most of 2011.

Analysts said the higher crude goods prices will be spilling into the cost of consumer goods and likely eventually push the key inflation indicator, the consumer price index, higher.

The consumer price index for August will be released on Friday.

The data comes as the Federal Reserve meets to weigh new monetary stimulus for the economy, with most expecting the 12-member policy panel to take fresh action despite worries among some about the potential of more easing to spark inflation.